skip navigation


Stay up to date on timely topics and market events. Subscribe to our Blog now.

May 27, 2021

April Durables Orders Register Slight Gain Outside of Autos; Capital Goods Orders Up Substantially

By Michael J. Bazdarich, PhD

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Headline durable goods orders declined in April by 1.3%, on top of a 0.3% downward revision to the March level. However, excluding transportation equipment, new orders for other durable goods registered a 1.0% gain on top of a 0.4% upward revision to March. We usually focus on durables excluding transportation equipment, because of the extra volatility of the transportation sector, and that focus is especially relevant presently given problems in the auto industry related to a shortage of microprocessors.

Digging yet deeper, new orders for capital equipment excluding aircraft rose 2.3%, offset only slightly by a 0.2% downward revision to March. Meanwhile, new orders for aircraft also rose in April and have held a decently positive level over the last three months, after languishing in negative territory for most of 2020. (Negative new orders means that order cancellations exceed new orders posted.)

Exhibit 1: Orders for Nondefense Capital Goods
Explore Orders for Nondefense Capital Goods
Source: Census Bureau. As of 30 Apr 21. Select the image to expand the view.

Our forecast line has been that both manufacturing and homebuilding had more than fully recovered from the Covid shutdown as of the end of last year, so that further growth in those sectors in spring 2021 and after would be minimal or even negative. That line has proven true lately for homebuilding, and the data through March had suggested a similar topping out in manufacturing activity. Indeed, industrial production data for April indicated slightly negative growth in factory output since January.

However, the new orders data now show continued growth in factory orders. While this continued growth is counter to our forecast, we’re glad to see it given the nondescript performance the factory sector turned in during 2018 and 2019.

Then again, with the new orders data giving such different readings from those of factory output and factory payrolls, there is some doubt as to which sets of data are presently giving the more accurate picture. Meanwhile, though GDP is described as a measure of output, it is actually calculated from spending data, so yes, the new orders data (for capital equipment) will be what is reflected in GDP data for 2Q.

© Western Asset Management Company, LLC 2021. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.